Business requires funding at a certain stage of its existence. Eventually you may raise the capital through family and friends.
As business picks up, you may consider getting a business loan, bringing in equity partners or seeking out angel investors. Once you grow to a certain size, you may even attract offers from venture capital or a private equity firm that are interested in a share of your business.
Instead of trying to raise large sums of money from a few individuals, crowdfunding attracts small investments from many people. You start by listing your business on crowdfunding sites, such as Kickstarter or Indiegogo, which exposes you to millions of investors.
Those who want to invest in you will put in a small sum of money, often in exchange for your product. Crowdfunding provides businesses with an unbiased feedback in the early stages of product development.